For many people in Mississippi who are struggling to pay down debts, filing for bankruptcy is a viable option to improve their financial position. During the peak of the recent financial downturn, almost 1.6 million bankruptcies were filed. The majority of those filings were made by consumers. The total number of annual filings dropped to under 800,000 by the time ten years had passed. People who have credit card debt may be able to get a fresh start via bankruptcy.
If the person is in a position where he or she has a lot of debt and does not own major assets like a home, a bankruptcy filing can clean the slate. As part of the bankruptcy process, petitioners are required to complete finance classes. These classes, which are taken both before and after the bankruptcy, can provide education, information and perspective that can be useful to the person going forward.
As many as two-thirds of all bankruptcies are filed because the person has medical debt. Going through divorce is also a common catalyst for bankruptcy filings. It’s a misconception that people who file for bankruptcy have to give up all of their assets. In a Chapter 7 bankruptcy, the filer may have the opportunity to reaffirm certain debts and keep assets like a home or a car.
Individuals who have questions about the bankruptcy process might want to schedule a meeting with a lawyer. A lawyer who has experience practicing bankruptcy law may be able to help by examining the client’s debts and income and suggesting options to reduce or eliminate outstanding debts. A lawyer may be able to help by drafting and filing the petition to begin the bankruptcy case, by communicating with the bankruptcy trustee on the client’s behalf or by ensuring the client completes necessary counseling and other requirements.
All types of people in Mississippi might experience financial hardship and fall behind on paying their debts. When debt collectors start to contact these people, they might use harsh tactics that inspire fear. The Consumer Financial Protection Bureau reports that 25% of debtors have felt intimidated by collection agencies. Although debt is a serious matter, people have legal rights that potentially give them the ability to limit aggressive collection practices.
Being served with papers for a lawsuit from a debt collector ranks high on debtors’ fears. Even when people feel helpless when confronted by lawsuits, they should never ignore them. They should supply their official answer to the court within the deadline stated in the lawsuit. When people fail to tell the court their side of the story, judges side with debt collectors. They issue judgments against debtors that could enable drastic actions like wage garnishment or asset seizure.
Debtors can demand that the parties suing them prove their right to collect the debt. Creditors often sell unpaid debts to collection agencies. Debts might pass through multiple hands before a collector files a lawsuit. Legally, the burden of proof falls on the collector. Collectors do not necessarily possess the documentation to support their demands for payment. If that party cannot provide documentation showing that the person signed a credit agreement, then the court could side with the debtor.
Before responding to a lawsuit, a conversation with an attorney might be informative. A lawyer could check on issues like the debt’s statute of limitations. A person experiencing financial difficulties could also learn about bankruptcy. A bankruptcy filing could temporarily halt collection actions or a foreclosure. A successful filing might discharge or restructure debts and give a person a fresh start on life.
Some people in Mississippi who are struggling with debt might want to consider filing for Chapter 13 bankruptcy. This can allow a person to keep some of his or her assets.
In a Chapter 13 bankruptcy, an individual works with the court to create a payment plan for paying off his or her debts over a period that lasts three to five years. People who are able to stick to the payment plan and make mortgage payments may be able to keep their homes. They might be able to keep other major assets as well as long as they can keep up with their payments. It may be possible to discharge the bankruptcy earlier if the payment plan is completed in less time than originally planned.
Some debts, including taxes, student loans and child support, must be paid in full and cannot be discharged in bankruptcy. The next level of debt includes any other major assets that can be repossessed if the debt is not paid. Finally, there are unsecured debts, such as medical and credit card debt. Most individuals who file for Chapter 13 might have to pay some of these debts, but the court may allow them to discharge them in part. A Chapter 13 bankruptcy only stays on a person’s record for seven years unlike Chapter 7, which remains on a credit report for 10 years.
A lawyer may explain a person’s options for debt relief and whether he or she qualifies for a Chapter 13 bankruptcy. It is necessary for someone to have an income that is high enough to make the necessary payments. Once the bankruptcy filing is made, foreclosure, creditor harassment and any other actions against the debtor must stop. However, a Chapter 13 bankruptcy can offer a person a fresh financial start, and a person can go on to rebuild his or her credit.
Americans owe a total of $1.4 trillion in student loan debt as of the first quarter of 2019. That figure was provided by Experian, and it represents a 116% increase in student loan debt over the past 10 years. While this has caused a financial burden for many young people, it is not the only form of debt that they have.
Research has indicated that individuals between the ages of 23 and 34 have more credit card debt than student loan debt. Collectively, Americans repaid $38.2 billion in credit card debt during the first three months of 2019. However, WalletHub says that individuals will put another $70 billion on credit cards during 2019 alone. Currently, Americans owe over $1 trillion to credit card companies. Financial professionals point to many reasons why individuals rely so heavily on credit cards and are struggling to repay their balances.
Monetary policy and a relatively weak dollar relative to inflation are popular theories as to why credit card debt is increasing. Low interest rates and more money in circulation generally results in prices going up and the value of the dollar staying flat. However, some believe that if Americans were better educated about the financial consequences of credit cards, they would be able to more effectively manage their debt.
Individuals who are facing financial challenges related to credit card or other types of debt may have ways to overcome them. One option may be to file for Chapter 7 bankruptcy. Doing so may make it possible to have certain unsecured debts discharged without making any payments. Other benefits of bankruptcy may include putting at least a temporary stop to creditor contact.
The decision to declare bankruptcy is not an easy one to make. Once you have chosen to commit to the process, it is normal to have a lot of questions about this unfamiliar undertaking.
You may already understand the difference between Chapter 7 and Chapter 13 bankruptcy, but something you may not have encountered before is preference law. If you are about to move forward with a Chapter 7 bankruptcy case, this policy may impact recent debt payments.
What is preference law?
Preference law refers to a period before you file for bankruptcy. During this time, if you make a payment on a debt, or the collector garnishes wages from your paycheck, that money may need to come back. By allocating precious funds from your existing assets, you give preference to one creditor over another.
The Chapter 7 bankruptcy process may involve liquidation of non-exempt assets. The money from this step can then go toward paying down some of your debt. Any payments you make 90 days prior to officially filing may be eligible for inclusion in this stage.
Why does it exist?
Creditors and debt collectors lose out when you declare bankruptcy. To remain fair to all those involved, the government put preference law into place to keep distribution of repayment even across the board. The idea is that each collector deserves repayment as much as the rest of them.
In some cases, preference law can work in your favor. Wage garnishment is often beyond your control. You will receive several paychecks within 90 days before filing, which adds up to a substantial amount of money. You can then distribute these funds across all your debts to minimize how much of the remaining balances become discharged.
You will likely have many questions about the process if you decide to file for bankruptcy. Keep this surprising law in mind as you prepare for the next steps.
